“We are still in the death grip of the banks as they attempt to portray themselves as the bulwarks of society even as they continue to rob us of homes, lives, jobs and vitally needed capital which is being channeled into natural resources so that when we commence the gargantuan task of repairing our infrastructure we can no longer afford it and must borrow the money from the thieves who created the gaping hole in our economy threatening the soul of our democracy.” Neil Garfield, livinglies.me

We all know that dozens of people rose to power in Europe and Asia in the 1930′s and 1940′s who turned the world on its head and were responsible for the extermination of tens of millions of people. World War II still haunts us as it projected us into an arms race in which we were the first and only country to kill all the people who lived in two cities in Japan. The losses on both sides of the war were horrendous.Some of us remember the revelations in 1982 that the United States actively recruited unrepentant Nazi officers and scientists for intelligence and technological advantages in the coming showdown with what was known as the Soviet Union. Amongst the things done for the worst war criminals was safe passage (no prosecution for war crimes) and even new identities created by the United States Department of Justice. Policy was created that diverted richly deserved consequences into rich rewards for knowledge. With WWII in the rear view mirror policy-makers decided to look ahead and prepare for new challenges.

Some of us remember the savings and loans scandals where banks nearly destroyed everything in the U.S. marketplace in the 1970′s and 1980′s. Law enforcement went into high gear, investigated, and pieced together the methods and complex transactions meant to hide the guilt of the main perpetrators in and out of government and the business world. More than 800 people went to jail. Of course, none of the banks had achieved the size that now exists in our financial marketplace.

Increasing the mass of individual financial institutions produced a corresponding capacity for destruction that eclipsed anything imagined by anyone outside of Wall Street. The exponentially increasing threat was ignored as the knowledge of Einstein’s famous equation faded into obscurity. The possibilities for mass destruction of our societies was increasing exponentially as the mass of giant financial service companies grew and the accountability dropped off when they were allowed to incorporate and even sell their shares publicly, replacing a system, hundreds of years old in which partners were ultimately liable for losses they created.

The next generation of world dominators would be able to bring the world to its knees without firing a shot or gassing anyone. Institutions grew as malignancies on steroids and created the illusion of contributing half our gross domestic product while real work, real production and real inventions were constrained to function in a marketplace that had been reduced by 1/3 of its capacity — leaving the banks in control of $7 trillion per year in what was counted as gross domestic product. Our primary output by far was trading paper based upon dubious and fictitious underlying transactions; if those transactions had existed, the share of GDP attributed to financial services would have remained at a constant 16%. Instead it grew to half of GDP. The “paradox” of financial services becoming increasingly powerful and generating more revenues than any other sector while the rest of the economy was stagnating was noted by many, but nothing was done. The truth of this “paradox” is that it was a lie — a grand illusion created by the greatest salesmen on Wall Street.

So even minimum wage lost 1/3 of its value adjusted for inflation while salaries, profits and bonuses were conferred upon people deemed as financial geniuses as a natural consequence of believing the myths promulgated by Wall Street with its control over all forms of information, including information from the government.

But calling out Wall Street would mean admitting that the United States had made a wrong turn with horrendous results. No longer the supreme leader in education, medical care, crime, safety, happiness and most of all prospects for social and economic mobility, the United States had become supreme only through its military strength and the appearance of strength in the world of high finance, its currency being the world’s reserve despite the reality of the ailing economy and widening inequality of wealth and opportunity — the attributes of a banana republic.

All of us remember the great crash of 2008-2009. It was as close as could be imagined to a world wide nuclear attack, resulting in the apparent collapse of economies, tens of millions of people being reduced to poverty, tossed out of their homes, sleeping in cars, divorces, murder, riots, suicide and the loss of millions of jobs on a rising scale (over 700,000 per month when Obama took office) that did not stop rising until 2010 and which has yet to be corrected to figures that economists say would mean that our economy is functioning at proper levels. Month after month more than 700,000 people lost their jobs instead of a net gain of 300,000 jobs. It was a reversal of 1 million jobs per month that could clean out the country and every myth about us in less than a year.

The cause lay with misbehavior of the banks — again. This time the destruction was so wide and so deep that all conditions necessary for the collapse of our society and our government were present. Policy makers, law enforcement and regulators decided that it was better to maintain the illusion of business as usual in a last ditch effort to maintain the fabric of our society even if it meant that guilty people would go free and even be rewarded. It was a decision that was probably correct at the time given the available information, but it was a policy based upon an inaccurate description of the disaster written and produced by the banks themselves. Once the true information was discovered the government made another wrong turn — staying the course when the threat of collapse was over. In a sense it was worse than giving Nazi war criminals asylum because at the time they were protected by the Department of Justice their crimes were complete and there existed little opportunity for them to repeat those crimes. It could be fairly stated that they posed no existing threat to safety of the country. Not so for the banks.

Now as all the theft, deceit and arrogance are revealed, the original premise of the DOJ in granting the immunity from prosecution was based upon fraudulent information from the very people to whom they were granting safe passage. We have lost 5 million homes in foreclosure from their past crimes, but we remain in the midst of the commission of crimes — another 5 million illegal, wrongful foreclosures is continuing to wind its way through the courts.

Not one person has been prosecuted, not one statement has been made acknowledging the crimes, the continuing deceit in sworn filings with regulators, and the continuing drain on the economy and our ability to finance and capitalize on innovation to replace the lost productivity in real goods and services.

We are still in the death grip of the banks as they attempt to portray themselves as the bulwarks of society even as they continue to rob us of homes, lives, jobs and vitally needed capital which is being channeled into natural resources so that when we commence the gargantuan task of repairing our infrastructure we can no longer afford it and must borrow the money from the thieves who created the gaping hole in our economy threatening the soul of our democracy. If the crimes were in the rear view mirror one could argue that the policy makers could make decisions to protect our future. But the crimes are not just in the rear view mirror. More crimes lie ahead with the theft of an equal number of millions of homes based on false and wrongful foreclosures deriving their legitimacy from an illusion of debt — an illusion so artfully created that most people still believe the debts exist. Without a very sophisticated knowledge of exotic finance it seems inconceivable that a homeowner could receive the benefits of a loan and at the same time or shortly thereafter have the debt extinguished by third parties who were paid richly for doing so.

Job creation would be unleashed if we had the courage to stop the continuing fraud. It is time for the government to step forward and call them out, stop the virtual genocide and let the chips fall where they might when the paper giants collapse. It’s complicated, but that is your job. Few people lack the understanding that the bankers behind this mess belong in jail. This includes regulators, law enforcement and even judges. but the “secret” tacit message is not to mess with the status quo until we are sure it won’t topple our whole society and economy.

The time is now. If we leave the bankers alone they are highly likely to cause another crash in both financial instruments and economically by hoarding natural resources until the prices are intolerably high and we all end up pleading for payment terms on basic raw materials for the rebuilding of infrastructure. If we leave them alone another 20 million people will be displaced as more than 5 million foreclosures get processed in the next 3-4 years. If we leave them alone, we are allowing a clear and present danger to the future of our society and the prospects for safety and world peace. Don’t blame Wall Street — they are just doing what they were sent to do — make money. You don’t hold the soldier responsible for firing a bullet when he was ordered to do so. But you do blame the policy makers that him or her there. And you stop them when the policy is threatening another crash.

Stop them now, jail the ones who can be prosecuted, and take apart the large banks. IMF economists and central bankers around the world are looking on in horror at the new order of things hoping that when the United States has exhausted all other options, they will finally do the right thing. (see Winston Churchill quote to that effect).

But forget not that the ultimate power of government is in the hands of the people at large and that the regulators and law enforcement and judges are working for us, on our nickle. Action like Occupy Wall Street is required and you can see the growing nature of that movement in a sweep that is entirely missed by those who arrogantly pull the levers of power now. OWS despite criticism is proving the point — it isn’t new leaders that will get us out of this — it is the withdrawal of consent of the governed one by one without political affiliation or worshiping sound sound biting, hate mongering politicians.

People have asked me why I have not until now endorsed the OWS movement. The reason was that I wanted to give them time to see if they could actually accomplish the counter-intuitive result of exercising power without direct involvement in a corrupt political process. They have proven the point and they are likely to be a major force undermining the demagogues and greedy bankers and businesses who care more about their bottom line than their society that gives them the opportunity to earn that bottom line.

On the other hand we should not assume that they have arrived nor that this decision will have pervasive effects throughout California or elsewhere in the United States or other countries.

J.P. Morgan did suffer a crushing defeat in this decision. And the borrower definitely receive the benefits of a judicial decision that will allow the borrower to sue for wrongful foreclosure including equitable and legal relief which in plain language means reversing the foreclosure and getting damages. Probably one of the most damaging conclusions by the appellate court is that an examination of whether the loan ever made it into the asset pool is proper in determining the proper party to initiate a foreclosure or to offer a credit bid at a foreclosure auction. The court said that alleged transfers into the trust after the cutoff date are void under New York State law which is the law that governs the common-law trusts created by the banks as part of the fraudulent securitization scheme.

Before you give them a standing ovation remember that it is possible for additional documentation to be created, fabricated and forged showing that despite the apparent violation of the cutoff date, the trustee has accepted the loan into the trust. This will most likely be a lie. I don’t think there is any entity acting as trustee of a trust that doesn’t know that it is under intense scrutiny and doesn’t want to be subject to liability that could amount to trillions of dollars advanced by investors with the purchase of bogus mortgage-backed bonds that were presumably managed by the trustee but in reality not managed at all because the bonds were worthless. This gave the banks the opportunity to claim that they owned the bonds and therefore had an insurable interest which gave rise to the whole problem with AIG and AMBAC and other insurers or parties who had guaranteed the bond, the loan or any loss (credit default swaps).

The fact that the loan in this case was definitely securitized is also interesting. Of course Washington Mutual was stating to everyone that it was not involved in the securitization of mortgage loans when in fact nearly all of the loans originated became subject to claims of securitization. This case explains why I never say that the loan was securitized or that the loan was in any particular trust, to wit: I don’t believe that a funded trust exists with the ability to purchase loans and therefore I don’t believe the loans are in any of the asset pools. So when people ask me how they can prove which trust their loan is actually in, I reply that they are asking the wrong question.

What is being played out here in this case and hundreds of thousands of other cases is a representation by the foreclosing entity that the trust owns the loan when in fact it never owned the loan nor could it because the money that was advanced by investors was never deposited into the trust. We have the same banks representing to regulatory authorities and insurers that it is the bank and not the trust that owns the loan even though the bank merely made the loan using money advanced by investors who believed that they were buying mortgage-backed bonds. The truth is they were merely making a deposit into an account maintained by the investment bank. The resulting transactions do not qualify for exemption as securities or insurance under the 1998 law. Nor do they qualify for REMIC treatment under the Internal Revenue Code.

In other words if you take a close look and actually follow the path of the money and the path of the paper you will find that despite the pronouncements from the Department of Justice and other agencies, this is a simple fraud case using a Ponzi model. The hallmark of a Ponzi model is that it collapses as soon as the investors stop buying the bogus securities. If the government cares to do so it can freely prosecute the individuals and companies involved without any air of exemption under the 1998 law because none of the parties followed the securitization path presumed by the 1998 law. So we are back to this, to wit: a security is a security and subject to SEC regulations and insurance is an insurance contract subject to insurance regulators, and fraud is fraud subject to recovery of restitution, compensatory damages, punitive damages, treble damages etc.

You should remember when reading this decision that the appellate court was not ruling in favor of the borrower granting the substantive relief the borrower was seeking. The appellate court merely reversed the trial court decision to dismiss the borrower’s claims. That only means that the borrower now as an opportunity to prove the elements of quiet title, wrongful foreclosure, slander of title, cancellation of instruments and relief under California’s version of unfair business practices. But the devil is in the details and proving the case requires aggressive discovery and aggressive preparation for trial. It is highly probable that the case will settle. The bank will probably be willing to pay almost any amount of money to avoid a judgment setting forth the elements of a wrongful foreclosure and how the bank violated the law.

The Bank will attempt to avoid any final order that undermines the value of loans that are subject to claims of securitization, because those loans supposedly support the value of the bogus mortgage-backed bonds sold to investors. Any such final order would also undermine the balance sheet of J.P. Morgan and any other major bank carrying the mortgage bonds as assets on their balance sheet. If those assets are diminished, then the bank is not as well funded as it has been reporting. In fact, those assets might well vanish completely from the balance sheet of those banks, causing the banks to be seized by the FDIC and broken up into smaller pieces for regional and community banks to pick up. Hence this decision represents a risk factor that could eliminate the legal fiction created by smoke and mirrors from Wall Street banks, to wit: it is not the borrowers who are deadbeats, it is the banks who are broke and whose management has run off with billions and perhaps trillions of dollars that should be in the United States economy. The absence of that money lies at the root of our unemployment and low economic activity.

This Glaski case has many of the elements that we have been discussing for years. Fabricated documents, forgeries, perjury, false affidavits and no money trail to backup the story painted by the fabricated documents. And of course it has our old friend Washington Mutual Bank And the supposed take over by Chase Bank that never actually happened.

And it involves the issue of assignments and the fact that the assignment is not the transaction itself but only a report of a transaction. If the borrower proves that the transaction reported in the assignment or other instrument of conveyance never occurred, or if the borrower is successful in shifting the burden of proof to the bank to show that it did occur, the assignment will have no value whatsoever unless the transaction is present, to wit: that someone actually purchased the loan through the payment of money or other valuable consideration that was received by a party who actually owned the loan.

Thus even if Chase Bank were able to show that it entered into a transaction in which the loans were transferred (something we can find no evidence of which the FDIC receiver says never occurred) that would only be the equivalent of a quit claim deed, to wit: whoever received the consideration for the transfer of the loans was merely conveying any interest they had even if they had no interest at all. Hence the transactions by which Washington Mutual allegedly came to be the owner of the loan must be examined in the same way as the transaction between the Washington Mutual bankruptcy estate and chase bank.

You should also take note that the decision was published with the admonition that it is “not to be published in the official reports.” this is further indication that the court is concerned about the far-reaching effects of the decision and essentially tells trial judges that they do not have to follow it. So for those who wish to point to this decision and say “game over” we are not there yet. But I do think that we passed the halfway point and we are probably in the fifth or sixth inning of a nine inning game. Translating that to time, I would estimate that it’s going to take another three or four years to clean up this mess and that it might take several decades to clean up the title corruption that was created by the banks.